PFRS FOR SMALL ENTITIES

Asian Oceanian Standard Setters Group Interim Meeting

September 15, 2022

Henly S. Pahilagao, CPA, PhD

FRSC Member
 Period Event

1997 The accounting standard setting body in the Philippines decided to

start a program to move fully to International Accounting Standards
issued by the International Standards Committee (IASC) and since then
has continued its adoption of international accounting standards.
AOSSG
EVOLUTION OF
2004 The Philippine Accounting Standard Council (ASC) approved the
INTERNATIONAL
Member
ACCOUNTING STANDARDS IN
adoption of revised IASs called Philippine Accounting Standards (PASs)
and the International Financial Reporting Standards (IFRSs) issued by the
International Accounting Standards Board (IASB) called Philippine
(27)
THE PHILIPPINES Financial Accounting Standards (PFRS) with first implementation
effective January 2005.

2005 Effectivity of the Adoption of the International Financial Reporting Standards

2010 Adoption of the IFRS for SMEs

2019 Adoption of the PFRS for Small Entities

Philippine Financial Reporting Framework
Full
PFRS PFRS
Effective Date 2005
Large and/or publicly-
interest entities
Assets: More than P350
million
Liabilities: More than P250
million
❑ Are required to file financial
statements under Part II of
SRC Rule 68;
❑ Are in the process of filing
their financial statements
for the purpose of issuing
any class of instruments in
a public market; and
❑ Are holders of secondary
licenses issued by
regulatory agencies.
PFRS for
SMEs PFRS for SEs
(effective January 1, 2019,
Effective Date 2010 early adoption is permitted)
Small entities
Medium-sized entities
Assets: More than P100 Assets: More than P3
million to P350 million million to P100 million
Liabilities: More than P100 Liabilities: More than P3
million to P250 million million to P100 million
❑ Are not required to file financial statements under Part II of
SRC Rule 68;
❑ Are not in the process of filing their financial statements for
the purpose of issuing any class of instruments in a public
market; and
❑ Are not holders of secondary licenses issued by regulatory
agencies.
 CATEGORIES OF
ESTABLISHMENTS
IN THE
PHILIPPINES
Reason for • Developed in response to feedback of small
Creating IFRS entities that IFRs for SME is too complex to
apply.
for Small • Allows small entities to comply with
Entities financial reporting requirements without
undue cost or effort
o Reduce choices for accounting treatment
o Eliminate topics that are not relevant to small entities
o Simplified methods for recognition and measurement
o Reduced disclosure requirements

5
KEY DIFFERENCES OF IFRS FOR SMALL
ENTITIES FROM PFRS FOR SMES
It does not have the concept of other comprehensive income and does not
require entities to present a statement of comprehensive income.

It does not provide for a list of minimum items to be presented in the

statement of income.

It has fewer disclosure requirements.

For changes in accounting policies or correction of prior period errors, it has

less onerous requirements
KEY DIFFERENCES FROM IFRS FOR SMES

It simplifies the requirements for measuring inventories

It simplifies lease accounting as it does not contain the concept of

“finance lease” nor does it require lease expenses or income to be
recognized on a straight-line basis over the term of the lease

Lastly, it incorporates more policy options for small entities.

 End of
Presentation